Financial services firms return to strong growth

Momentum is expected to continue into the coming quarter (Picture: PA) Stefan Rousseau/PA

Financial services firms are seeing their strongest growth since before the recession as momentum picks up in the City.

A quarterly CBI and PwC poll found 60% of firms said business volumes were up while 11% said they were down in the three months to September, giving a balance of plus 49% - which was the best reading since 2007.

It said the momentum was expected to continue into the coming quarter.

Rising volumes helped push up overall profitability, which bounced back after the previous quarter's contraction, the CBI said - despite costs rising at a record pace.

Rain Newton-Smith, CBI director for economics, said: "The UK's financial services sector is enjoying its strongest run of growth since 2007, with activity rising across all customer categories and profitability bouncing back.

"The spike in costs was offset by a steep fall in the value of non-performing loans, suggesting that much of the fallout from the financial crisis is now working its way out of the system."

The impacts of competition and regulation such as the prospect of a financial transaction tax were among the top concerns for the coming year, she added.

The poll found firms had returned to hiring following the previous quarter's fall in headcount, but this was expected to stabilise in the next quarter.

The CBI said that taking into account long-run trends, the results suggested employment in financial and insurance activities was forecast to stand at little over 1.15 million by the end of 2014, or 28,000 higher than the year before.